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Illinois Condo Lawyers Helping with Developer Turnover
Every condominium association in Illinois goes through a transition when it is turned over by the developer. During this phase, the control of the condominium association also shifts from the developer to the unit owners. The process for this phase in condominium associations is governed by the Illinois Condominium Property Act.
At times, the transition process may seem complicated, but a successful condo board turnover from developer is crucial to the future success of your condominium association in Illinois.
For more information on transitioning from developer control to owner control for a condominium association, reach out to us at Hirzel Law today.
When is the Developer Required to Turn Over Control of the Condo Association?
Before the developer transitions control to the condo association, this phase is referred to as “Developer Control.” Until the first condo board of managers is elected, which the majority of must be comprised unit owners, the developer is usually still held responsible for the rights, titles, powers, privileges, trusts, duties, and obligations of the board. The developer is also responsible for paying all common expenses incurred on behalf of the condominium, and no assessments can be levied against the association until the time of the first conveyance.
Transitional Control in Illinois condo associations takes place at various intervals based on the percentage of condominium units sold. Transactional control must happen no later than 60 days after the conveyance of 75% of the units, or 3 years after the recording of the declaration, whichever comes first.
How Does a Condo Association Hold a Developer Liable for Construction Defects?
If a condominium has construction defects, the board of directors should hire a condominium attorney and engineer to assist them in resolving any construction defects. It is not uncommon for a new condominium to have construction defects. Examples of common construction defects found in new condominium are as follows:
- Drywall or foundation cracking.
- Flooding or ponding due to improper grading or insufficient drainage.
- Heaving or cracking concrete.
- Pipe bursts due to poor insulation.
- Prematurely cracking in roads or failing to install the wearing course.
- Retaining walls that prematurely fail.
- Water leaks from improper installation of shingles, siding, flashing, or windows.
After the board of managers become aware of a potential construction defect, the association should attempt to negotiate a resolution with the responsible parties. The process is typically started by sending a demand letter to the developer. The demand letter should 1) outline the known construction defects, 2) offer a proposed solution to the defects and 3) summarize the potential costs involved. If settlement negotiations prove unsuccessful, the board of managers should evaluate whether a lawsuit should be filed or whether the association should repair the problem itself. It is critical that this process begin early as many developers are set up as single purpose entities who may not have assets to pay for the “fix.”
What Responsibility Does a Condo Developer Have for Creating a Reserve Fund?
Before concluding the condo board transitional control from the developer control phase, you should ensure that the developer funded the condominium association’s reserve fund. The reserve fund should set the association up for capital expenditures and deferred maintenance for repair or replacement of the common elements.
Section 9 of the Condominium Property Act requires all budgets adopted by a board of managers to provide for “reasonable reserves for capital expenditures and deferred maintenance for repair or replacement of the common elements”. However, the reserve requirement can be waived if there is no reserve requirement in the condominium instruments by a 2/3 vote of the association. If the requirement is waived, it can then be reinstated by another 2/3 vote. Importantly, if the requirement is waived, it must be disclosed in the financial statements of the association and highlighted in bold print, told to prospective purchasers.
Contact Our Condo Lawyers for Help with Illinois Condo Board Transition and Developer Control
The phases of transitional and developer control can be extremely difficult to understand, but it is essential for the future of your Illinois association. At Hirzel Law, PLC, our Illinois condo lawyers can help your condo association with transitional control and developer control and issues that may arise. We stand by our clients, offering the highest quality legal representation and promptly responding to our clients’ needs.